Sam Ulloa traces a direct line between the struggles of his immigrant parents and his decision to start Listo!, a San Jose company he co-founded to provide more inclusive financial services to underserved communities, particularly in the Latino community.
Both of my parents earned minimum wage and getting access to affordable credit — to buy a reliable vehicle to get to work, or even to rent an apartment at a fair rate — was challenging for them,” says Ulloa. “Neither of my parents had a credit score at that time, so it made it difficult if not impossible to move up the financial ladder.”
His company is building a data-driven platform to assess risk based on factors often not considered by mainstream lenders. Its more nuanced assessments will help bridge the gap between those lenders and borrowers whose credit history is unknown or uncertain. Listo! can help people struggling to pay their bills avoid the trap of borrowing from predatory lenders, and also put them on a path to build their credit profile. As their credit history improves, Ulloa says, they’ll be able to access the loans they may need to buy a reliable car for work or grow their own businesses.
“Technology and AI levels the playing field,” says Ulloa, the 2022 recipient of the GSB’s Jerry I. Porras Latino Leadership Award. “By taking in more data, we can use it to provide more intelligent options for the consumer.”
Listo! has raised $14 million in venture capital and now has 22 employees, with offices in California and Mexico. Ulloa says the company is close to profitability and has helped thousands of borrowers improve their credit and save money.
How did growing up as the son of immigrant laborers influence your career path to Listo!?
It influenced it heavily. We immigrated here due to economic hardship, and realized it was hard to make ends meet. But I knew my parents and my friends were creditworthy. This population may have limited collateral but has “high moral collateral.” And there are a lot of hard-working people, who are deserving of access to responsibly priced financial services, just like my parents. It’s a great opportunity to build an enduring, social-mission-driven company while doing good for a massive market.
You compare credit companies to teachers who give a failing grade to students who have not actually taken the test. What’s the best way to prevent that?
In the U.S., you have prime credit scores and subprime credit scores. A large percentage of the population is misclassified as subprime simply because there is limited data on these consumers. I believe that leveraging alternative data and the use of machine learning can help these consumers get a fair chance at accessing responsible credit.
How did that happen?
Older models were based on traditional scorecards that were limited regarding the predictors of risk. Today many people are being excluded because mainstream institutions use limited factors when assessing creditworthiness. But we’re now in an era where technology is disrupting every sector, and through that we can normalize the playing field. You can use machine learning to assess creditworthiness more accurately, and then give borrowers the credit they truly deserve.
Why are Latinos more likely to be “credit invisible” or have unscored credit records?
A large percentage of the Latino population is recent immigrants, so that factors into this. But the other factor affecting second- and third-generation Latinos is the lack of awareness of how to build a good credit history in the U.S. It’s not like their parents can add them to their credit cards to build credit. People from low- to moderate-income communities typically lack the savings they need to qualify for a secured credit card, which is another common practice to a more mainstream way to build credit.
What specifically will make Listo!’s credit scoring system more accurate in terms of the Latino community?
Many mainstream institutions leverage limited attributes when predicting creditworthiness and have an overreliance on FICO scores. But FICO is a chicken-or-egg thing. Somebody has to give you the opportunity for credit in order to build credit. We are building a systemic data-driven methodology that will help measure creditworthiness more accurately. Through our responsible partners we have given borrowers with limited or no FICO scores their first opportunity to enter a credit relationship with an institution and build a credit profile over time. More importantly, our vision is to scale this through partnerships with credit unions and banks. We know there are many mainstream institutions that would love to be more inclusive by offering their products to this underserved consumer. We see ourselves as the enablers.
How does someone access the help Listo! offers?
The best way to illustrate that is to share the story of a typical customer. Maria is married with two children. She earns an average of $40,000 in annual income, has no credit score, drives a pretty old car that breaks down frequently. When her car breaks down again, Maria is in need of money to repair her car. Maria hears about Listo! and applies for a loan to get the money she needs to repair her car, versus going to a predatory lender that will charge her a very high interest rate and will not help her build her credit score or provide upward mobility. As she is approved and successfully repays her loan, her credit profile gets stronger over time. Eventually she’ll have the credit she’ll need to qualify for an auto loan that will enable her to buy a more reliable car to get to work.
How does Listo! then build on that?
As we gather more data, our algorithms will recommend an auto insurance premium that can save her additional money on her auto insurance premium. At the tail end of the customer journey, Maria will have a better risk profile, have more savings, and ideally will be in a position where she might qualify for a first-time home loan. Listo has already helped thousands of people, like Maria, from underserved communities save millions in interest and fees by providing them with access to better lending and insurance products.
Failure to accumulate debt works against a borrower, but that collides with cultural reluctance in Latino communities to incur debt. How is Listo! trying to address that dilemma?
There’s good debt and bad debt. For us the important thing is to avoid the bad debt — the impulse buys, loading up your credit cards. We’re not financing televisions and consumer goods. Good debt is buying an asset that helps you improve your net worth, such as obtaining a good auto loan to purchase a reliable vehicle that’s going to allow you to earn a steady income by making it to work every day. Otherwise, you risk getting fired for missing work. Unfortunately, that’s a reality for our customers. Our hope is that over time, they will be able to eventually invest in a home, which is one of the best ways to build wealth. We’re giving people money at the time of need to cover emergencies, and as we get the money to cover those needs, we set them on a path to building a brighter financial future.
What’s in it for the banks, and how do you convince them to trust you?
We help them acquire credit-worthy borrowers. For example, we take their loan products, get a good understanding of the risk profile they’re looking for, and match it to the customer. That’s Phase 1. Phase 2 is, once done with the credit-scoring algorithms, we will help augment our partners’ credit decisioning models so that they can increase their approval rates and earn more profit while providing much needed responsible credit to this large, underserved community.
What did you learn during your two years at Apple that has proven especially influential for you?
How to be a better leader and influence a fast-growing organization that’s extremely innovative. I was involved with the MacBook Pro. The people I worked with didn’t report directly to me, but I depended on their output. The team was geographically disbursed throughout the world, mostly from Asia on the supply side. There was a lot of great collaboration, and I learned to be a better leader as a result of that experience.
What accomplishment in your life are you particularly proud of?
Being a father to four kids is the most rewarding. But starting a company such as Listo! is scary. Your opportunity costs are so high, and when you have a family that depends on you the risk is even higher. It’s rewarding to be where we are now, building a growing company that has real positive impact in people’s lives in a market that’s the largest, fastest-growing underserved market in the U.S.
Was there a failure during your career that taught you an important lesson?
The biggest and most humbling experience was before attending Stanford business school. I had left a well-paying job at a global technology services company in late 2000 to help start a company with some talented Stanford engineers. The business model consisted of leveraging the technology of Silicon Valley and web-enable companies from Latin America that were 5 to 10 years behind. That company, Innervations, didn’t survive the dotcom bust. And then we went into a recession, so there wasn’t a whole lot of employment. That was life-changing in that I realized that failing is not an endpoint, but just part of the growth journey.
Any professors at the GSB whose advice you found especially helpful?
Joel Peterson was very formational to me. He shared some of his personal journey both as a father and as an entrepreneur, and the challenges he went through by going down the least traveled path. I reflected on his stories and realized that by taking more risk the journey will be that much more rewarding. He also shared some humbling failures that gave me confidence, that I could bounce back, as well. Stanford culture gives you the confidence to take calculated risks, and Joel was formative in shaping that culture. Professors like Joel gave me the confidence to make these often scary decisions in life that end up allowing me to have a much bigger impact on the world.
Photos by Steve Castillo